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Minews Story
Date: May 04, 2006
Crew Gold Corporation Moves Steadily Towards Mid-Tier Status
By Jack Hammer
Crew Gold Corporation is listed in Oslo and Toronto; has assets in Guinea, Greenland, Norway, South Africa and the Philippines; and is run out of Weybridge in the UK. Chief executive Jan Vestrum isn’t bothered by all that geographical diversity, though. On the contrary it’s central to the Crew strategy. What’s more he’s just poached [abwerben] someone from Newmont to do all the travelling between projects on his behalf, so the three airline gold cards he holds in his wallet may now have to be stood down. Mr Vestrum’s arguments in favour of the geographical diversity are sensible, although out of step with prevailing orthodoxy on the London markets.
In expounding[erklären] Crew’s strategy Mr Vestrum begins by stating that, “very few mining companies can prove that they get any synergies out of being focussed in one geographical area”. There are some obvious counter-arguments to that statement, but the key to his thinking is that he doesn’t want Crew to be exposed to only one kind of political risk, arguing instead that, “as a mining company the quality of the project is key”. This is a classic dilemma for a small mining company, indeed for any investor looking to balance risk and reward, but Mr Vestrum’s decision to go for diversity may also go some way to explaining why he won’t contemplate a UK listing either, since the City has in recent years favoured clear focus over diversification.
One obvious example of a company roughly handled by London because of its tendency to diversity is Cambridge Mineral Resources, which with assets in Columbia, Peru, Spain and Bulgaria, constantly struggles to justify the combination. Likewise when Mexican silver miner Minco bought an asset in Siberia, eyebrows were raised, heads scratched, and shares sold. Caledonia Mining is another company that finds its geographical diversity a hard sell, and even Algy Cluff worries that the phrase “Pan African” on the cover of his annual report is too general and not specific enough to his west African area of focus.
Crew is slightly different though. In spite of Mr Vestrum’s slightly eccentric argument that the company’s diverse portfolio of assets can be efficiently co-ordinated with effective IT, it’s perhaps unfair to lump the company in with the likes of Cambridge and Minco, both of which are smaller companies. Indeed Crew is in some ways diametrically opposed to Cambridge, which seems to want to operate lots of little mines. Mr Vestrum says that after Crew goes through its 600,000 ounce per annum target in 2007 he wants to take the company up to the million ounce mark. “But not with ten 100,000 ounce mines, with bigger ones”. So far that kind of plan looks realistic, especially if the fair wind of the strong gold price prevails.
The current production profile is based on Crew’s three key assets, the Lefa gold mine in Guinea, which should produce 350,000 ounces per year by 2008, the Apex project in the Philippines, which should produce 200,000, and the Nanaluq project in Greenland, which should produce around 100,000. By that stage the company hopes to have just under 3.5 million ounces in reserves, with another 9 million in the measured and indicated resource categories, and to be producing at cash costs of just US$222 per ounce. If it can achieve all that then the Norwegian investors who’ve recently been building stakes should be very happy indeed. 
There’s some work to be done, though. Cash costs for 2005 were US$391/oz, but with the Guinea operations acquired with another Norwegian company, Guinor Gold, now under its belt Crew is a different beast. Cash costs there had run at around US$500/oz, but a new 6.5-7 million tonnes per year carbon- in- leach plant due for commissioning in the fourth quarter of this year will get costs down to around US$220/oz. Meanwhile other moves are afoot. Mr Vestrum hints that more deals may be done in the Philippines, and plans to spin off the company’s base metals assets on the Canadian markets continue to progress. In recent months Crew’s share price has risen by over C$1 to C$2.70. Much of that rise may be due to the strong gold price, but as Crew moves steadily towards mid-tier status it may well consolidate those gains.
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